Registration document &

Transcription

1 This document is a non-certified translation of the original French text for information purposes only. The declaration by the person responsible for the document is not applicable to this translation and is therefore not included herein. The original document was filed with the Autorité des marchés financiers (AMF), the French market regulator, on 17 April 2013 under No. D in accordance with article II of the AMF s General Regulations. Registration document & financial annual report 2012

2 Contents PAGE PAGE 1 Person responsible for the Registration Document Person responsible for the information contained in the Registration Document Attestation by the person responsible for the Registration Document 3 2 Statutory auditors Alternate auditors Deputy statutory auditors Information on statutory auditors having resigned, having been dismissed or not having been renewed 5 3 Selected financial information Overview of the Group Selected financial information 8 4 Risk factors Risks relating to the Group s business Risks related to the industry in which the Group operates Legal risks Market risks Risks related to the Company Risk management 19 5 Information about the Company History and development of the Company Investments 23 6 Business overview Overview of the Group s businesses Group strengths and strategy Description of the businesses and introduction to the markets Dependency factors Legislative and regulatory environment 54 7 Organization chart Simplified legal organization chart for the Group as at December 31, Information on subsidiaries and shareholdings 57 8 Real estate, factories and equipment Real estate and equipment Environmental policy 63 9 Examination of the financial position and results Introduction Comparison of the earnings for 2012 and Comparison of the earnings for 2011 and Cash flow and equity Equity Cash flows Indebtedness Analysis of certain off-balance sheet liabilities Research and development, patents and licenses Information on trends Recent events Trends and objective Profit forecasts or estimates Administration and general management bodies Composition of the Board of Directors, Chairman and Chief Executive Officer Detailed information on the management expertise and experience of the members of the Board of Directors Personal information concerning the members of the Board of Directors Conflicts of interests in the administration and General Management bodies 108

3 PAGE PAGE 15 Remuneration and benefits Remuneration and benefits in kind Pension, retirement and other benefits Operation of the administrative and management bodies Operation of the Board of Directors Operation of the management bodies Limitation of powers Internal audit Date of expiry of the term of office of the directors Information on the service agreements binding the members of the Company s administration and management bodies Declaration relating to corporate governance Employees Overview Share subscription and purchase options Employee profit-sharing Shareholding of the Company s officers and transactions conducted by members of the Board of Directors in the Company s shares Principal shareholders Distribution of the share capital and voting rights Voting rights Control of the Company Agreements capable of leading to a change of control Operations with related parties Contracts and operations with related parties Financial information on the Company s assets and liabilities, financial position and income statements Accounting policies Historical financial information Statutory financial statements at December 31, Auditors fees Dividend policy Legal proceedings and arbitration Significant changes to the financial or commercial position Additional information Share capital Constitutional documents and by-laws Significant contracts Information coming from third parties, expert declarations and declarations of interest Documents available to the public Information on holdings 198 Appendix 1 - Report by the Chairman on corporate governance and internal control 199 Appendix 2 - Statutory auditors report on the report of the Chairman of the Board of directors 208 Appendix 3 - Corporate social responsibility 210 Appendix 4 - Elements constituting the 2011 financial annual report and management annual report Glossary Intra-group operations Statutory auditors report on regulated agreements and commitments 127 Elements of the annual financial report 2012 Registration Document VICAT 1

4 Introduction Vicat, a French société anonyme, with a share capital of 179,600,000 whose registered office is Tour Manhattan, 6 place de l Iris, Paris-La Défense, registered with the Registry of Companies and Commerce of Nanterre under number , is referred to as the Company in this Registration Document. Unless expressly stated otherwise, the Group refers to the Company and its subsidiaries and holdings as set forth in the organization chart in section 7 Organization chart of this Registration Document. Unless otherwise indicated, the figures used in this Registration Document, in particular in section 6 Business Overview of this Registration Document, are extracted from the Group s consolidated financial statements, prepared in accordance with IFRS. As the figures have been rounded, the amounts indicated as being totals and the various sections of this Registration Document may not equal the arithmetic sum of these figures and numbers. This Registration Document contains indications on the Group s prospects and development policies. These indications are sometimes identified by the use of the future and the conditional tenses, and forward-looking terms such as consider, intend, think, with the aim of, expect, plan, should, want, estimate, believe, wish, could or, if necessary, the negative form of these terms, or any other alternative or similar terminology. This information is not historical data and must not be interpreted as an assurance that the facts and data stated will occur. This information is founded on data, assumptions and estimates considered as reasonable by the Group. They are likely to change or be modified due to uncertainties, related in particular to the economic, financial, competitive and regulatory environment. Moreover, the materialization of certain risks described in section 4 Risks factors of this Registration Document is likely to have an impact on the Group s activities, situation, financial results and on its capacity to achieve its objectives. Forward-looking statements contained in this Registration Document also encompasses the known and unknown risks, uncertainties and other factors which could, if they materialize, affect the Group s future results, performances and achievements. These factors can in particular include changes to the economic and commercial situation as well as the risk factors set out in section 4 Risk factors of this Registration Document. Investors are invited to consider carefully the risk factors described in section 4 Risk factors of this Registration Document before making their investment decision. The materialization of all or some of these risks is likely to have an adverse effect on the Group s activities, financial position or financial results. Moreover, other risks, not yet identified or considered by the Group as not significant could have the same negative effect and investors could lose all or part of their investment. This Registration Document contains information relating to the markets on which the Group operates. This information comes, in particular, from studies carried out by third parties. Given the changes which may affect the industry in which the Group operates in France and worldwide, this information may prove to be incorrect or no longer up to date. The Group s activities could consequently evolve differently from what is described in this Registration Document and the declarations or information contained herein could prove to be incorrect. This Registration Document serves as the financial annual report and includes information required pursuant to article of the General Regulations of the AMF. In order to facilitate the reading of the financial annual report, a cross-reference table is included in appendix 4 of this Registration Document. 2 VICAT 2012 Registration Document

5 1 Person responsible for the Registration Document 1.1. Person responsible for the information contained in the Registration Document Person responsible for the information contained in the Registration Document Mr. Guy Sidos, Chief Executive Officer Registration Document VICAT 3

6 2 Statutory Auditors 2.1. Incumbent auditors Alternate auditors Information on statutory auditors having resigned, having been dismissed or not having been renewed Incumbent auditors KPMG Audit Immeuble Le Palatin, 3 cours du Triangle, Paris-La Défense Cedex Represented by Mr. Bertrand Desbarrières. Member of the Regional Company of Auditors of Versailles. Date first appointed: Ordinary General Meeting held on November 25, Expiry of the current term on the date of the Ordinary General Meeting approving the financial statements for the year ended on December 31, Wolff & Associés SAS Centre Beaulieu, 19 boulevard Berthelot, Chamalières Represented by Mr. Grégory Wolff. Member of the Regional Company of Auditors of Riom. Date first appointed: Ordinary General Meeting held on May 16, Expiry of the current term on the date of the Ordinary General Meeting approving the financial statements for the year ended on December 31, The Board of Directors decided at its meeting on February 24, 2013, to propose to the Ordinary General Meeting to be held on April 26, 2013, that the mandate of Wolff & Associés, represented by Mr. Patrick Wolff, be renewed for a term of six financial years, i.e. until the Ordinary General Meeting approving the financial statements for the year ended on December 31, VICAT 2012 Registration Document

7 Statutory Auditors 2.2. Alternate auditors Alternate auditors Constantin Associés 185 avenue Charles de Gaulle, Neuilly-sur-Seine Represented by Mr. Jean-Marc Bastier. Member of the Regional Company of Auditors of Paris. Date first appointed: Ordinary General Meeting held on June 20, Expiry of the current term on the date of the Ordinary General Meeting approving the financial statements for the year ended on December 31, The Board of Directors decided at its meeting on February 24, 2013, to propose to the Ordinary General Meeting to be held on April 26, 2013, that the mandate of Constantin Associés be renewed for a term of six financial years, i.e. until the Ordinary General Meeting approving the financial statements for the year ended on December 31, Exponens Conseil et Expertise 11 avenue d Éprémesnil, Chatou Represented by Mr. Frédéric Lafay. Member of the Regional Company of Auditors of Versailles. Date first appointed: Combined General Meeting approving the financial statements for the year ended on December 31, Expiry of the current term on the date of the Ordinary General Meeting approving the financial statements for the year ended on December 31, Information on statutory auditors having resigned, having been dismissed or not having been renewed Not applicable Registration Document VICAT 5

8 3 Selected financial information 3.1. Overview of the Group Selected financial information 8 The Group s key figures 8 Summary income statement 8 Change in the breakdown of sales and EBITDA by business 9 Change in the breakdown of sales and EBITDA by geographic area 9 Summary balance sheet 10 Change in the breakdown of the assets employed and investments by business 10 Simplified changes in shareholders equity (including minority interests) 11 Consolidated financial ratios 11 Investors are advised to read the following selected financial information together with section 9 Examination of the financial position and results, section 10 Cash flow and Equity, the audited annual consolidated financial statements for the three years covered by this Registration Document and the notes relating thereto in section 20 Financial information of this Registration Document, as well as any other financial information contained herein Overview of the group Over a period of more than 150 years, the Company Vicat S.A. (the Company ) together with all the subsidiaries it directly and indirectly controls, these subsidiaries and the Company together called the Group (the Group ), has developed considerable expertise in the Cement, Ready-mixed concrete and aggregates businesses enabling it to maintain a leading regional position in the majority of the markets in which it operates. Cement is its core business, on which it focuses its development and which accounted for 50 % of its consolidated sales in Wherever the market situation justifies it, the Group pursues a policy of vertical integration into Ready-mixed concrete and aggregates, which accounted for 36 % of consolidated sales in The Group also benefits from synergies with complementary activities (precast concrete products, construction chemicals, transport, paper and bags businesses), undertaken in certain markets, to consolidate its range of products and services and to strengthen its regional position. In 2012, the Group s total shipments in the three main businesses amounted to 17.9 million tonnes of cement related products, 7.9 million m 3 of concrete and 21.5 million tonnes of aggregates. With a presence covering eleven countries across Europe, North America, Asia, Africa and the Middle East, the Group has a diversified base which allows it to pursue an international development strategy, while reducing its present and future expo- sure to economic fluctuations that may affect the markets in which it operates. 6 VICAT 2012 Registration Document

9 Selected financial information 3.1. Overview of the Group 3 Cement Concrete & Aggregates Other Products & Services France United States Switzerland Turkey Senegal Egypt Italy Kazakhstan Mali India Mauritania The share of sales in France fell slightly, representing over 38 % of consolidated sales in 2012, compared with over 41 % in Sales in the Turkey-Kazakhstan-India region currently represent over 19 % and make it the second largest region in terms of contribution to Group sales; the share of the Africa and the Middle East fell to slightly over 16 %. Finally, the share of the United States increased during the year and now accounts for almost 9 % of consolidated sales. In 2012, EBITDA ratios on sales and consolidated net earnings on consolidated sales were 19.1 % and 6.4 % respectively. The Group s financial structure is characterized by significant equity ( 2,465 million) and a low level of net debt (46.4 % of equity), which gives the Group good flexibility and the means to finance its growth. The Group intends to continue its development by combining growth and profitability. Over the years, it has demonstrated its ability to benefit from its strong regional positions, the quality of its production facilities and the expertise of its employees to achieve high levels of profitability. The Group gives priority to two growth strategies: - organic growth, by significantly increasing its production capacity and by developing the means to respond to demand in the markets where it operates. In 2006, the Group committed to an industrial investment plan extending over several years, the Performance 2010 plan, intended both to increase its cement production capacity by 50 % by the end of 2010, with the start-up of one new kiln each year during this period in order to reduce its production costs and to strengthen its competitive position. This Performance 2010 plan was completed with the opening of a new cement kiln in Senegal in October It has enabled the Group to increase its cement sales in a difficult macroeconomic context. - the Group also intends to continue its selective external growth policy through acquisitions or greenfield plants that will enable it to take a position as a key player on new regional markets, or which will complement its existing production capacity or its range of products and services. In 2010, the Group acquired a majority stake of 51 % in the Indian Company Bharathi Cement Company. A new factory in Kazakhstan began production in 2011 and the new greenfield Vicat Sagar cement plant in the State of Karnataka in India came on stream in the second half of To achieve its goals, the Group can rely on its industrial and commercial expertise in its core businesses and on the stability of its strategic model, backed by its shareholders and a family management present in the Company since its foundation and having in-depth experience of these businesses Registration Document VICAT 7

10 3 Selected financial information 3.2. Selected financial information 3.2. Selected financial information The selected financial information has been extracted from the Group s consolidated financial statements, prepared in accordance with IFRS for the three years ended December 2010, 2011 and The Group s consolidated financial statements, for each of the three years covered by this Registration Document, were audited by KPMG Audit and Wolff & Associés SAS, statutory and independent auditors whose reports are included in section 20 Financial information of this Registration Document. The Group s key figures (in millions of euros) Consolidated net sales EBITDA (1) Consolidated net income Total equity Net debt/equity (in %) 46,4 % 43,8 % 38,6 % Net income per share (euros/share) 2,87 3,64 4,52 Dividend per share (euro/share) 1,50 (2) 1,50 1,50 (1) Earnings Before Interest, Taxes, Depreciation and Amortization: Gross Operating Earnings plus other ordinary income (expense). EBITDA is not an aggregate defined by accounting policies. Since EBITDA is calculated differently from one company to another, the data provided in this Registration Document and related to the Group s EBITDA might not be comparable to EBITDA data from other companies. (2) Proposal of the Board of Directors to the General Meeting of the shareholders to be held on April 26, Summary income statement (in millions of euros) Change 2012/2011 (in %) 2010 Change 2011/2010 (in %) Consolidated net sales % % EBITDA % % EBIT (1) % % Financial income (expense) (40) (44) % (27) % Consolidated net income % % Group share of net income % % Cash flows from operations % % (1) Earnings Before Interest and Taxes: EBITDA less depreciation, amortization and operating provisions. EBITD is not an aggregate defined by accounting policies. Since EBITD is calculated differently from one company to another, the data provided in this Registration Document and related to the Group s EBITD might not be comparable to EBITD data published by other companies. 8 VICAT 2012 Registration Document

11 Selected financial information 3.2. Selected financial information 3 Consolidated sales by business (2) (in millions of euros) EBITDA by business (3) (in millions of euros) , , , ,033 1,138 1, Cement Concrete & Aggregates OPS (1) Cement Concrete & Aggregates OPS (1) (1) OPS: Other Products & Services. (2) Unless stated otherwise, the figures are stated after intra-group eliminations. (3) Earnings Before Interest, Taxes, Depreciation and Amortization: Gross Operating Earnings less other ordinary income (expense). EBITDA is not an aggregate defined by accounting policies. Since EBITDA is calculated differently from one company to another, the data provided in this Registration Document and related to the Group s EBITDA might not be comparable to EBITDA data from other companies. Consolidated sales by geographic area (in millions of euros) EBITDA by geographic area (in millions of euros) , , , France Europe (excluding France) United States Turkey Kazakhstan India Africa & Middle East France Europe (excluding France) United States Turkey Kazakhstan India Africa & Middle East 2012 Registration Document VICAT 9

12 3 Selected financial information 3.2. Selected financial information Summary balance sheet (in millions of euros) ASSETS Non-current assets 3,622 3,495 3,455 Current assets 1,150 1,231 1,112 Total assets 4,772 4,727 4,566 LIABILITIES Group share of the equity 2,131 2,112 2,141 Minority interests Total equity 2,465 2,461 2,557 Non-current liabilities 1,604 1,709 1,510 Current liabilities Total liabilities 4,772 4,727 4,566 Assets employed by business (in millions of euros) Total investments by business (in millions of euros) ,573 3,576 3, ,845 2,810 2, Cement Concrete & Aggregates OPS (1) Cement Concrete & Aggregates OPS (1) (1) OPS: Other Products and Services 10 VICAT 2012 Registration Document

13 Selected financial information 3.2. Selected financial information 3 Simplified changes in shareholders equity (including minority interests) (in millions of euros) Shareholders equity as at January 1 2,461 2,557 2,082 Income for the year Dividends (88) (122) (84) Effect of exchange rate fluctuations (48) (124) 116 Change in consolidation scope (1) (33) 150 Other changes (7) (10) 29 Shareholders equity as at December 31 2,465 2,461 2,557 Consolidated financial ratios (in millions of euros) Net debt/total equity (in %) Net debt/ebitda (1) Net debt/cash flows from operations Coverage of net financial expenses by EBITDA by EBIT (1) Earnings Before Interest, Taxes, Depreciation and Amortization: Gross Operating Earnings plus other ordinary income (expense). EBITDA is not an aggregate defined by accounting policies. Since EBITDA is calculated differently from one company to another, the data provided in this Registration Document and related to the Group s EBITDA might not be comparable to EBITDA data from other companies Registration Document VICAT 11

14 4 Risk factors 4.1. Risks relating to the Group s business Risks related to the competitive environment Sensitivity to energy supply and costs Country risks Industrial and environmental risks Risks related to the industry in which the Group operates Risks of dependency on the construction market (cyclical nature of the construction market), real estate (residential and nonresidential), industry, public works and urban development markets Risks related to regulation Climate risks Legal risks Market risks Exchange rate risks Conversion risks Interest rate risks Equity and securities risks Risks relating to liquidity Risks related to the Company Risks related to dependence on managers and key employees Risks relating to the financial organization of the Group Risks related to dependence on customers Risk management Risk prevention policy Risk hedging and insurance policy 19 Before taking the decision to invest in the Company, prospective investors should examine all the information contained in this Registration Document, including the risks described below. These risks are those which, as of the date of filing of this Registration Document, are liable, if they materialize, to have an adverse effect on the Group, its business, its financial position or its earnings, and which are material to any decision on whether or not to invest. However, the attention of prospective investors is drawn to the fact that the list of risks set out in this section 4 Risk factors is not exhaustive and that there may be other risks either unknown or which at the date of this Registration Document, were not considered as likely to have an adverse effect on the Group, its business, its financial position, or its earnings, but could in fact adversely affect its activities, its financial position, its earnings, its prospects or its ability to achieve its objectives Risks relating to the Group s business Risks related to the competitive environment The Group operates its various businesses in competitive markets. In relation to the Group s main businesses - Cement, Ready-mixed concrete and Aggregates - competition is principally on a regional scale, due to the relative magnitude of transport charges (especially in the case of road transport). The competitive intensity of each regional market depends on present and available production capacities. The Group s ability to maintain its sales and its margin on each market therefore depends on its capacity to respond to market demand with its local production facilities. The presence of other producers with available or surplus capacities on a regional market or one in the vicinity, or the presence of one or more producers having or being capable of setting up material import infrastructures (in the case of cement and aggregates) on the regional market under satisfactory economic conditions (for example, through port or rail access) may lead to increased competition. 12 VICAT 2012 Registration Document

15 Facteurs de risques 4.1. Risks relating to the Group s business 4 Intense competition in one or more of the markets in which the Group operates may have a material adverse effect on its business, its financial position, its earnings, its prospects or its capacity to achieve its objectives, in particular in the context of a world-wide economic crisis and considerable financial instability. This is particularly the case in the cement manufacturing business, given the highly capital intensive nature of this business and the significant effect of a volume variance on its results (see section 6.2. Group strengths and strategy and sections and Competitive position of this Registration Document) Sensitivity to energy supply and costs The Group s production activities and, in particular, the cement manufacturing business, consume large amounts of thermal and electrical energy, which represent a significant part of production costs. The Group s electricity is supplied by local producers in each country and the group does not always have an alternative supply source. This situation exposes the Group to interruptions in electricity supply or price increases. Where the group has considered this risk is significant, it has established independent electricity generation facilities. Except as otherwise discussed above and in section Availability of certain raw materials of this Registration Document, the Group believes that it is not dependent on its suppliers. For its supplies of thermal energy, the Group buys fossil fuels on the international markets and is thus exposed to fluctuations in the price of such fuels. In order to limit its exposure, the Group has on the one hand adapted its production facilities to use, to the extent possible, a variety of fuels, and, on the other hand is continuing with forward purchasing in order to smooth out the effects of fuel price fluctuations. It has also developed a policy intended to foster the use of alternative fuels, namely waste materials, as described in section Optimized mix of energy sources in Appendix 3 of this Registration Document. However, increases or significant fluctuations in the price of electricity or fuel may have a material adverse effect on the Group s business, its financial position, its earnings, its prospects or its capacity to achieve its objectives Country risks An integral part of the Group s growth strategy is to seize development opportunities in growing markets. In 2012, approximately 35 % of the Group s sales were made on these markets, referred to as emerging markets. This exposes the Group to risks such as political, economic and financial or social instability, staff safety, difficulties in recovering customer debts, exchange rate fluctuations, high inflation rates, the existence of exchange control procedures, export controls, taxation and differences in regulatory environments that may affect the markets on which the Group operates, and even nationalizations and expropriations of private property that could affect companies operating in these markets. Thus in 2012, the Group s results in Egypt have continued to be affected by the consequences of the political events which occurred at the beginning of the year of 2011 (cf. section Change in operating income of this Registration Document. With regard to the outlook, see also section of this Registration Document). Although the Group carefully selects the countries in which it operates, the materialization of some of these risks could affect the continuity of its businesses in the countries concerned and have a material adverse effect on its business, its financial position, its earnings, its prospects or its capacity to achieve its objectives Industrial and environmental risks Risks related to production facilities The Group s factories were built in compliance with applicable standards and were designed so as to afford a significant degree of resistance to natural risks such as wind, snow and earthquakes. The choice of sites for the factories also considers natural flooding risks. The Group s production facilities are equipped with monitoring and control systems incorporating automatic devices and software, whose malfunction could affect the factories daily operations. Heavy production facilities are protected against risks of breakdown and machine failure by permanent maintenance programs and by reserves of spare parts (such as engines, reducers and bearings etc.) for the most important systems and those with long lead times. Due to their remoteness, which lengthens lead times, the Group ensures that its factories located in emerging markets rigorously apply this policy of maintaining reserves of spare parts. However, the Group cannot exclude the occurrence of such events, which could have a material adverse effect on its business, its financial position, its earnings, its prospects or its capacity to achieve its objectives Registration Document VICAT 13

16 4 Facteurs de risques 4.1. Risks relating to the Group s business Risks related to industrial investments The Group s development relies, in particular, on industrial investments intended to modernize its existing equipment and increase production capacity or develop new production capacity (greenfield plants in India). Regardless of the quality of the service providers used, any delay or difficulty in meeting the required performances may have a material adverse effect on the Group s business, its financial position, its earnings, its prospects or its capacity to achieve its objectives Environmental risks The Group s principal environmental risks are the result of its activities which are governed by laws and regulations imposing a large number of obligations, restrictions and rigorous protective measures. The Group is constantly taking measures to address and limit these risks, paying particular attention to the following areas: integrating quarries into their environment, optimizing choices of energy sources, with an increasing share of alternative fuels and waste, controlling emissions, including greenhouse gases, managing and recycling the water needed for production.these measures are developed in section 1 The strategy of «sustainable construction» in Appendix Risks related to product defects Products manufactured by the Group are monitored throughout the production process. The Group also verifies the compliance of its products with the standards applicable in the markets where they are sold. However, despite these controls, it cannot exclude the possibility that malfunctions or accidents may result in product quality defects. Such defects could have a material adverse effect on the Group s reputation, its activities, its financial position, its earnings, its prospects or its capacity to achieve its objectives Availability of certain raw materials The Group has its own reserves of limestone, clay and aggregates, which are used for its industrial activities. It also buys some of these raw materials on certain markets from third-party suppliers, as well as additives such as blast furnace slag (from steel works), fly ash (a by-product of coal combustion in power stations) and synthetic gypsum. The supply of raw materials to the Group s factories is ensured by the rigorous management of reserves and quarry operations. a specific in-house organization dedicated to this role enables complete confidential control of raw materials through the combined work of specialists and experts in geology, mining and the environment. From geological and geochemical surveys to the determination of the intrinsic properties of the materials, from computer modeling to operational simulations and extraction and reinstatement work, Vicat employs the best technology there is. Thus, the study and monitoring of deposits enables their chemical balance to be monitored and the long-term continuity of supplies to the factories to be checked constantly. Depending on the country, land is controlled by purchase or by an operating agreement with the owners, who may be the State itself. This stage occurs after a complete survey of the subsurface by geophysical or destructive probes. Nevertheless, if the quarries operated directly by the Group or its suppliers suddenly ceased trading or were forced to cease or reduce production of these raw materials, the Group may be required to obtain its supplies at a higher cost and may not be able to recover such increased costs through price increases, or seek replacement raw materials, which could have a material adverse effect on its business, its financial position, its earnings, its prospects or its capacity to achieve its objectives Risks related to the industry in which the Group operates Risks of dependency on the construction (cyclical nature of the construction market), real estate (residential and non-residential), industry, public works and urban development markets The products and services sold by the Group, and in particular cement, concrete and aggregates, are used for construction of individual or multiple occupancy housing, for industrial or commercial buildings and for infrastructure (roads, bridges, tunnels, highways). The demand for the products and services sold by the Group depends both on structural elements specific to each market and their evolution and on general economic conditions. Structural factors that determine demand for construction materials on each market are mainly demography, the rate of urbanization and economic growth (represented for example by the gross national product per capita) and the 14 VICAT 2012 Registration Document

17 Facteurs de risques 4.2. Risks related to the industry in which the Group operates 4 respective growth rates of these parameters, as well as more cultural elements such as the construction practices of each market (timber, steel, concrete). a frequently used indicator of the intensity of consumption is cement consumption per capita. Aside from these structural factors, the economic situation influences construction markets through the economic climate, and particularly in the current context of worldwide economic crisis and considerable financial instability. This is because global economic parameters determine the capacity of the public and private sectors to finance construction projects by access to credit, and to implement them. To reduce the risk of the cyclical nature of a given market, the Group has adopted a geographical development strategy (detailed in section 6.2.3) aiming to combine investments in developed countries in emerging countries, that thereby contribute to a diversification of its geographical exposure. However, significant fluctuations of any of these parameters in a market to the Group ar likely to have a material adverse effect on its activities, its financial position, its earnings, its prospects or its capacity to achieve its objectives Risks related to regulation The Group operates in a highly regulated environment. It must comply with many legislative and regulatory provisions, which differ in each of the countries in which it operates. In particular, the Group is subject to strict international, national and local regulations relating to the operation of quarries or cement factories (see section 6.5. Legislative and regulatory environment of this Registration Document). The continuation of any operation depends on compliance with these legislative and regulatory requirements. In this respect, the Group has developed a permanent dialogue with the local authorities and residents and environmental protection associations, in all its operating areas, and instituted measures intended to reduce the harmful effects related to quarrying operations to limit the risks of conflict. However, should the Group be unable to comply with the applicable regulations in the future, it could face withdrawals of operating licenses, incur liabilities or be sentenced to pay fines. The deterioration in the economic situation in a number of countries where the Group operates is a factor in the increase in fiscal pressure, aimed at increasing government revenues by potentially calling into question the tax benefits granted under mining agreements and thus being a potential source of disputes. More generally, the Group cannot give assurances that rapid or significant modifications of the legislation and regulations in force will not occur in the future, whether at the initiative of the relevant authorities or following an action brought by a third party or local associations opposed to the development by the group of its activities. Changes in applicable regulation or its implementation could lead to the imposition of new conditions for carrying on its business, which may increase the Group s investment costs (related, for example, to adapting the methods of operating its quarries or cement factories), or its operating costs (in particular by the institution of procedures or controls and additional monitoring), or may constitute an impediment to the development of its business. The Group cannot exclude that such developments may have a material adverse effect on its activities, its financial position, its earnings, its prospects or its capacity to achieve its objectives Climate risks The construction materials business operated by the Group in various markets experiences seasonal fluctuations, which depend both on climate conditions and on the practices of each market. Beyond the usual incidence of such seasonal fluctuations, which is described in section 9 Examination of the financial position and earnings of this Registration Document, the Group s business could be affected by climate risks that could have an impact on its most significant markets. The demand for construction materials is directly affected by exceptional climatic conditions (such as very cold temperatures, or abundant rain or snow) which may affect the normal use of materials on building sites, particularly during periods of intense activity in the construction sector. The occurrence of such conditions in a market important to the Group could have a material adverse effect on its activities, its financial position, its earnings, its prospects or its capacity to achieve its objectives Legal risks The Group s companies are or are likely to be involved in a certain number of legal, administrative or arbitration proceedings in the normal course of their business. For example, changes to laws and regulations, as well as the increasing activity of local associations opposed to development of the cement industry may generate administrative proceedings and potential disputes Registration Document VICAT 15

18 4 Facteurs de risques 4.4. Market risks Damages are or can be claimed against the Group under some of these proceedings (see section 6.5. Legislative and regulatory environment and section Legal proceedings and arbitration of this Registration Document). The policy of allocating provisions is set out below in note of section Notes to the 2012 consolidated financial statements of this Registration Document Market risks The Group operates within an international framework through locally established subsidiaries, some of which account for their operations in non-euro currencies. The Group is therefore exposed to exchange rate and conversion risks Exchange rate risks The subsidiaries business essentially involves producing and selling locally, in their operating currency, so the Group feels that its current and future exposure to exchange rate risks is very low overall in this respect. These companies imports and exports denominated in currencies other than their own local currency are generally hedged by forward currency purchases and sales. A significant proportion of the Group s gross financial indebtedness is borne by the Company and is denominated in euros after the conversion of US Dollar denominated debts through financial hedging instruments (cross currency swap or forex). Intragroup financings are hedged by subsidiaries if the loan currency is not the same as the subsidiary s operating currency. The Group is still exposed in some countries where there is no hedging market (currency not convertible) or the market is not sufficiently liquid. The table below sets forth the breakdown of the total amount of the Group s assets and liabilities denominated in currencies as at December 31, 2012, when the transaction currency is different from the subsidiary s operating currency. The main risk involves the US Dollar as this table shows: (In millions) US Dollar Euro Swiss Franc Assets Liabilities and confirmed orders (1,002.0) (190.1) (8.0) Net position before risk management (759.7) (183.9) (8.0) Hedging instruments Net position after risk management (144.6) (6.2) 0.0 The net position after risk management in US Dollars corresponds mainly to the Kazakhstan subsidiaries debt to finance providers and to the Group which are not swapped in the operating currency. The exchange rate risk on this debt was partly hedged in 2013 by forward purchases of Dollars amounting, as at March, 31, to $ 83,6 million. The hypothetical loss on the net currency position arising from an unfavorable and uniform change of one centime of the operating currency against the US Dollar would amount to 1.08 million (including 1.11 million for the Kazakhstan loan). However, the Group cannot exclude the fact that an unfavorable change in exchange rates could have a material adverse effect on its activities, its financial position, its earnings, its prospects or on its capacity to achieve its objectives Conversion risks The financial statements of the Group s foreign subsidiaries (other than in the Euro zone) as expressed in their operating currencies are converted into Euros, the «presentation currency», in preparing the Group s consolidated financial statements. Fluctuation of the exchange rate of these currencies against the Euro results in a positive or negative variation in the Euro value of the subsidiaries income statements and balance sheets in the consolidated financial statelments. The effect of fluctuating exchange rates on the conversion of the financial statements of Group s foreign subsidiaries (other than in the Euro zone) on the consolidated balance sheet and the income statement is discussed in sections 9. «Examination of the financial position and earnings» and 10 «Cash flow and equity» of this Registration Document. 16 VICAT 2012 Registration Document

19 Facteurs de risques 4.4. Market risks Interest rate risks The Group is exposed to an interest rate risk on its financial assets and liabilities and its cash. This exposure to interest rate risk corresponds to two categories of risk Exchange rate risks for items in the financial assets and liabilities at a fixed rate When the Group incurs a debt at a fixed rate, it is exposed to an opportunity cost in the event of a fall in interest rates. Interest rate fluctuations have an impact on the market value of fixed rate assets and liabilities, while the corresponding financial income or financial expense remains unchanged Cash flow risks related to items in the assets and liabilities at variable rates The interest rate risk is generated primarily by variable interest rate items in the assets and liabilities. Interest rate fluctuations have little impact on the market value of variable rate assets and liabilities, but directly affect the Group s future income flows and expenditure. Exposure to interest rate risks is managed by combining fixed and variable rate debts on the one hand and on the other hand by limiting the risk of fluctuation of variable rates by recourse to hedging instruments (caps: rate ceilings) and by short term cash surpluses remunerated at a variable rate. The Group refrains from speculative transactions in financial instruments. Financial instruments are exclusively used for financial hedging purposes. The table below shows the breakdown of the fixed and variable rates by currency of the Group s net exposure to the interest rate risk after hedging as at December 31, Euro Dollar US Other currencies Total Total gross debt 854, , ,183 1,381,615 Debt at fixed rate (including swaps and CCS) 671,293 12, , ,629 Debt at variable rate 183, ,671 31, ,986 Hedging instruments (Caps) 360,000 26, ,527 Gross debt at variable rates hedged (176,596) 165,144 31,911 20,459 Cash and cash equivalents (19,440) (14,868) (203,036) (237,344) Net position after hedging (196,036) 150,176 (171,028) (216,888) The significant residual position, excluding cash, corresponds to the Kazakhstan subsidiary s loan, denominated in US Dollars and at an interest rate of Libor$ 6 month rate. After conducting the exchange rate hedging transactions referred to above in 2013, the hedged part of this debt, $ 83.6 million, will be denominated in variable rate Tengue. The Group estimates that a uniform change in interest rates of 100 basis points would have an insignificant impact on its earnings, or on the Group s net position as the table below illustrates: (In thousands of euros) Impact on earningsbefore tax Impact on equity (excluding impact on earnings) before tax Impact ofa change of bps in the interest rate ,339 Impact of a change of bps in the interest rate (89) (7,662) Equity and securities risks The Group does not have a securities portfolio, other than holdings of treasury shares, purchased principally in June 2007 in the context of the sale by Heidelberg Cement of its shares in the Company. The situation of this portfolio of treasury shares as at December 31, 2011 is as follows: - Number of Vicat shares held in the portfolio 937,060; - Percentage of share capital held by the Company 2.09 %; - Carrying cost of the portfolio by the historical cost method (purchase price) 75,338 thousand; - Net carrying cost of the portfolio 42,815 thousand; - Market value of the portfolio 44,023 thousand Registration Document VICAT 17

20 4 Facteurs de risques 4.5. Risks related to the Company Changes in the Vicat share value below the historical purchase price may lead to a change in the Company s earnings, in respect of which a provision of 32,535 thousand was made for share depreciation before tax as at December 31, 2012, after a recovery of 5,265 thousand before tax in Under its cash flow management plan, the Group invests only in short term cash instruments (having a maturity of less than three months) exhibiting no risk of variation in the value of the principal invested. These investments were made with a diverse group of leading banks. These surpluses are denominated in Rupee, Turkish Pounds, Egyptian Pounds, Swiss Franc, Euro and US Dollar. Certain defined benefit pension plans, in the United States and in Switzerland, are hedged in full or in part by dedicated financial assets consisting, in part, of equity securities. The sensitivity of the value of these hedging assets at the end of 2012 corresponding to a change of basis points in the rate of return excepted from the assets is respectively 3 and (3) million. The hedging assets are largely made up of financial assets other than shares, so the equity and securities risk is considered to be insignificant. A negative trend in financial markets could result, in certain cases, in a need to supplement the financing or the provisioning for these plans in order to meet the obligations of the relevant Group companies. A significant increase in contributions by the Group or an increase in provision in accordance with IAS 19 may have a material adverse effect on the Group s activity, its financial position, its earnings, its prospects or its capacity to achieve its objectives Risks relating to liquidity Today, the Group is exposed to limited liquidity risks, as discussed in section Group financial policy of this Registration Document and in note 17 Financial instruments in the appendix to the consolidated financial statements. The maturities of the debt as at December 31, 2012 are shown below: N+1 N+2 N+3 N+4 N+5 et + (en milliers d euros) Nominal Interest* Nominal Nominal Nominal Nominal US Private placement 611, ,956 28, , ,235 Compulsory loans Bank loans 715,079 78,926 26,589 73,456 51, , ,555 Financial leasing debts 8,837 3, ,794 1, Miscellaneous debts 20,410 13,437 1,770 5, Creditor banks 23,395 23, Derivative instruments 2,766 (844) (1,200) 369 (201) 6,465 (3,023) Total financial liabilities 1,381, ,978 56,334 82, , , ,645 * The interest on the N+1 debt is calculated on the basis of the known due date of the debt as at December 31, 2012 and the interest rates at that date. The Group does not publish earnings or cash flow forecasts, so no calculation is made on following years. The liquidity risk is therefore covered by surpluses of cash and by the availability of unused confirmed credit lines for the Company, over 1 and 3 year periods. Considering the small number of companies concerned, essentially Vicat SA, the parent Company of the Group, the low level of net debt (as at December 31, 2012 the Group s gearing and leverage were 46.4 % and x2.6 respectively) and the liquidity of the Group s balance sheet, the existence of covenants contained in some of these credit lines agreements does not constitute a risk for the Group s financial position. At December 31, 2012, the Group is compliant with all ratios required by covenants in contained financing contracts Risks related to the Company Risks related to dependence on managers and key employees The Group s future success relies in particular on the complete involvement of its senior managers. The management team has been marked by stability over a long period (service with the Group in most cases of over fifteen years) and benefits from significant experience of the markets in which the Group operates. In addition, the Group s continuing growth will require the recruitment of a qualified and internationally mobile supervisory staff. Should the Group suddenly lose several of its managers or be unable to attract these key employees, it could encounter difficulties affecting its competitiveness and its profitability. These difficulties could have a material 18 VICAT 2012 Registration Document